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Volatile hiring: uncertainty in search and matching models

Den Haan, Wouter J., Freund, Lukas and Kaerner Rendahl, Pontus (2021) Volatile hiring: uncertainty in search and matching models. Journal of Monetary Economics, 123. 1 - 18. ISSN 0304-3932

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Identification Number: 10.1016/j.jmoneco.2021.07.008

Abstract

In search-and-matching models, the nonlinear nature of search frictions increases average unemployment rates during periods with higher volatility. These frictions are not, however, by themselves sufficient to raise unemployment following an increase in perceived uncertainty; though they may do so in conjunction with the common assumption of wages being determined by Nash bargaining. Importantly, option-value considerations play no role in the standard model with free entry. In contrast, when the mass of entrepreneurs is finite and there is heterogeneity in firm-specific productivity, a rise in perceived uncertainty robustly increases the option value of waiting and reduces job creation.

Item Type: Article
Official URL: https://www.sciencedirect.com/journal/journal-of-m...
Additional Information: © 2021 The Authors
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
Date Deposited: 09 Aug 2021 09:30
Last Modified: 17 Nov 2021 01:09
URI: http://eprints.lse.ac.uk/id/eprint/111568

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